A Repository for C. A. Howard's Brain Traffic

Da Luigi, the restaurant in this photo, is not far from the Blue Grotto on Capri. If I had only one afternoon to live, I think I would like to spend it here. Drift on in to the little cove in the boat you've hired for the day, drop anchor, and await the restaurant's launch that will bring you in to the sunbathing area. This is where I like to look around to see if my future wife is in attendance. From there, a chatty Italian waiter will escort you to your table, where you are encouraged to while away the afternoon over delicious food, wine, and plates of olives, prosciutto, and parmigiano.

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Thursday, May 04, 2006

"The Dinner Club"

My friend Kiliaen sent me this a few months ago, and it is one of my favorite examples of a clever way to explain, in laymen's terms, why some fiscal policy is dumb, and some is not:

Tax Cuts for the Rich?

Suppose that every day 10 men go to a restaurant for dinner. The bill for all ten comes to $100. If it was paid the way we pay our taxes, the first four menwould pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest) would pay $59.

The 10 men ate dinner in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve. Since you are all such good customers, he said, I'm going to reduce the cost of your daily meal by $20. Now dinner for the 10 only costs $80. The first four are unaffected. They still eat for free. How do they divvy up the $20 savings among the remaining six so that everyone gets his fair share?

The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth man and the sixth man would end up being paid to eat their meal. The restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same percentage, and he proceeded to work out the amounts, each was used to paying. And so now the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of $59.

Outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20," complained the sixth man, pointing to the tenth, "andhe got $7!" "Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got seven times more than me!" "That's true," shouted the seventh man. "Why should he get $7 back when I got only $2? The wealthy get all the breaks!""Wait a minute," yelled the first four men in unison."We didn't get anything at all. The system exploits the poor."

The nine men surrounded the tenth and beat him up. The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They were $52 short!

And that is how America's tax system works. The people who pay the highest taxes necessarily get the most benefit from a tax reduction; as they should. Tax them too much, attack them for being wealthy, and they just may not show up at the table any more. There are lots of good restaurants in Switzerland and the Caribbean!